IT glitch results in Cadbury chocolate glut

Problems in the introduction of an SAP-based system led to an excess of chocolate bars, leading to a hit on profits.

9 June 20064:23 am AEST

U.K. confectionery giant Cadbury Trebor Bassett has taken a hit in its profits after information technology problems caused too many chocolate bars to be produced.

Cadbury was left with a glut of chocolate products at the start of the year, after the installation of a new SAP-based enterprise resource planning (ERP) system led to an excess of chocolate bars building up at the end of 2005.

The buildup of chocolate bars caused by the IT problems was then exacerbated by a slow start to the U.K. confectionery market in 2006, when many people's New Year diets kick in after the overindulgence of the festive season.

As a result, Cadbury was forced to put hefty discounts on its product lines, including Crunchie, Double Decker and Cadbury bars, to clear the high levels of inventory that had built up. This led to a total hit of 32 million pounds ($58.9 million) on Cadbury's first-quarter financial figures, 12 million pounds ($22 million) of which the company said was directly related to the IT problems.

Todd Stitzer, CEO of Cadbury's global parent company Cadbury Schweppes, cited "stock issues related to the implementation of new IT systems," adding that it had contributed to a challenging start to the year for the confectionery and drinks group's European region.

The new U.K. computer system is part of a five-year IT transformation project, called "Probe", aimed at integrating the Cadbury Schweppes' supply chain, purchasing, manufacturing, distribution, sales and marketing systems on a global, SAP-based ERP platform.

Cadbury Schweppes is aiming for an ultimate savings from the Probe project, but its implementation has been far from smooth. The project was beset by problems and delays when it was first introduced in Australia in 2002.

The Probe ERP system was finally launched in the U.K. at Cadbury in July last year. A Cadbury representative said the IT problems relating to the U.K. introduction have been resolved.